A Startup Sportsbook's Big Bet On Creation Of Its Own Cryptocurrency

Darren Heitner
, ContributorI cover the intersection of sports and money.Opinions expressed by Forbes Contributors are their own.

FansUnite is creating its own digital currency on the Ethereum blockchain.

As the future of sports betting has become the most pressing issue in the gaming industry, at least in the United States, one company is focused on creating a more equitable and fair pricing model for bettors, with enhanced prospects of attaining long-term profitability, by reducing operator margins from as high as 5% to a flat 1% margin on all bets.

The company, FansUnite, says that it is able to provide this decrease in margins to bettors and maintain comfort in profitability due to the creation of its own digital currency as well as through building its own risk management platform around cutting-edge machine learning calculations currently only utilized by the most advanced betting syndicates.

As of now, Vancouver-based FansUnite is a social sports betting network whereon members are able to track their results and follow other bettors to exchange strategies. Top bettors on the site maintain thousands of followers.

FansUnite.com currently offers a free virtual currency, allowing users to place fantasy wagers with no monetary risk. However, in the near future, the company seeks to harness the power of the Ethereum blockchain. The concept is that users will be able to actually bet on sports as they would in traditional sportsbooks, but with FanUnite's own digital currency. A typical bettor who wins 52% of the time at a sportsbook may end up losing money based on a sportsbook's margins. FansUnite is seeking to change the game with their lower margins provided based on lower operating costs, allowing users an enhanced ability to actually profit from their bets.

Use of its own currency and blockchain technology is also supposed to increase transparency and security for FansUnite bettors by storing all pertinent bet information on the blockchain — leaving an immutable and auditable record of each bet. The assumption is that use of the blockchain reduces the risk of bets being reneged or canceled post-match as well. Also, the use of a single, new currency is projected to accelerate the process of depositing and withdrawing funds and to remove the need for inefficient wires or money transfers.

"Smart contracts are a natural fit for sports gambling, ensuring contracts are honored exactly as entered — no reneging or canceling of bets," explains FansUnite in a "love letter to bettors" it published in October.

While FansUnite promises to provide compliance with gambling regulatory bodies, it also wants to increase anonymity relative to traditional sportsbooks by only identifying users by their unique blockchain address. It claims to be the first token-based operator to have built a relationship with regulatory bodies and licensing authorities, which serves to stabilize its token better than any competitors in the space.

“Our years of experience operating our free-to-play virtual sportsbook and listening to our members have provided us with a clear picture of issues with the existing sports betting landscape,” said FansUnite CEO Darius Eghdami. “With blockchain we simply saw an opportunity to address these issues and potentially help improve conditions for sports bettors globally by providing a cheaper, more transparent and secure system for bettors.”

FansUnite previously raised roughly $400,000 in seed capital before being acquired by Victory Square Technologies (CSE:VST)(OTC:VSQTF)(FWB:6F6) for $2 million in August 2016. It launched a partnership with SecurePlay, a BTL Group subsidiary, in September 2016 to begin development of its blockchain technology. In June 2017, it announced its intention to create a blockchain-enabled sportsbook and incorporated FansUnite Limited in gaming-friendly Gibraltar in September.

The company has made it clear that its Token Generation Event is not intended for nor applicable to Canadian or U.S. citizens. FansUnite's sportsbook platform will be inaccessible in the U.S. unless legislation against sports betting is changed. FansUnite co-founder and COO Duncan McIntyre believes that when the legal landscape is altered, his company will have a competitive advantage over traditional sportsbooks.

“FansUnite has an enormous opportunity before us with the momentum behind legal sports betting in the US quickly gaining steam," said McIntyre. "We’re perfectly situated to take advantage of this changing tide with a new and compelling value proposition to bettors in a sector that has remained relatively unchanged for the past decade.”